RBA cash rate

[againsthegrain]

It isn't that actually. A number of the components (education, white goods, alcohol & tobacco, house purchase, etc) in the CPI do not apply to me. For the others such as fuel costs or groceries, any actual monetary increase is minor - about $400 pa combined I estimate - and is easily accommodated within my finances and so I have no need to care about it.

Sounds like you have a very reasonable wife/kids (can only dream) or none ?

 

[wayneL]

I'm pretty much in the same boat as Belli, well, except for alcohol

We will be growing most of our own food and virtually off the grid (still connected to power and water but almost zero imported usage of each).

It could still be a long run before we kick the bucket so am concerned about inflation/currency debasement and trying to invest accordingly (but apart from PMs and a moderate HODL position in crypto, largely on the sidelines at the moment)

My biggest regret is not shorting Bonds when I knew I should have

 

[Belli]

Sounds like you have a very reasonable wife/kids (can only dream) or none ?

I am a widower and have been so for a number of years. My children are adults but I still fling them funds where I view those surplus to my needs and wants.

 

[JohnDe]

"What about the remaining two thirds of households? Well, higher interest rates actually help households with cash savings – such as in term deposits – which can include renters aspiring to be first home buyers, but mostly comprise retirees. Higher interest rates boost the disposable incomes of such households."

 

[wayneL]

"What about the remaining two thirds of households? Well, higher interest rates actually help households with cash savings – such as in term deposits – which can include renters aspiring to be first home buyers, but mostly comprise retirees. Higher interest rates boost the disposable incomes of such households."

Well, technically true if interest rates are positive in real terms, otherwise savers/retirees are just going backwards less quickly.

 

[JohnDe]

Well, technically true if interest rates are positive in real terms, otherwise savers/retirees are just going backwards less quickly.

As Belli points out "It isn't that actually. A number of the components (education, white goods, alcohol & tobacco, house purchase, etc) in the CPI do not apply to me. For the others such as fuel costs or groceries, any actual monetary increase is minor - about $400 pa combined I estimate - and is easily accommodated within my finances and so I have no need to care about it." I know quite a few people in the same position.

 

[StockyGuy]

Well, technically true if interest rates are positive in real terms, otherwise savers/retirees are just going backwards less quickly.

Welp at least they're not having having to pay the bank to leave they're savings in the bank... it was a remote possibility for a while in Aus. But yeah it's much much of a muchness when inflation so high - you're still effectively paying to leave money as cash.

 

[Belli]

retirees are just going backwards

Some aren't. Never feel sorry for anybody who is on a defined benefit pension which is indexed to the CPI. I know a few of them but I'm not one of them having my funds rolled over to the SMSF.

Quick way to calculate their notional worth. Divide the annual pension by the RBA cash rate. That's how much you'd need in the bank earning that interest rate to receive the equivalent amount. Even a "modest" $25k pa equates to approximately $7m. Thank God, I'm now out of the industry dealing with some of the blighters.

 

[wayneL]

As Belli points out "It isn't that actually. A number of the components (education, white goods, alcohol & tobacco, house purchase, etc) in the CPI do not apply to me. For the others such as fuel costs or groceries, any actual monetary increase is minor - about $400 pa combined I estimate - and is easily accommodated within my finances and so I have no need to care about it." I know quite a few people in the same position.

Yep.

But eventually I'm going to have to buy a new bogan ute... maintenance on the pile of bricks, replace the bore pump, buy a new pair of RM Williams boots, etc.

I'm up for cataract surgery sometime in the future and probably hearing aids, not to mention mobile phones which I manage to destroy with monotonous regularity.

And let's not mentioned the occasional culinary extravagance

All are affected by inflation over the long-term... 10, 20, 30 years henceforth.

I watched my mother's wealth (because she refused to do anything other than term deposits) from over a million dollars (when that was actually a shytload of cash) to 50k when she died, over 30 year period.

Hopefully, if I get to 90, I will be able to pay a nubile young lady to cut my wagyu beef up into small enough pieces to chew

 

[wayneL]

Some aren't.

Quite true, but it does still require some financial nouse.

That's the point of this conversation is that you still have to figure out how to hedge against the continuous debasement of currency.

 

[Belli]

Only my opinion but one method is to continue to invest and spend less than your income. As I've been doing both for many, many years it has now become ingrained so much so the only time I take much notice of my holdings is when I am going to place funds. As I hold only some LICs and ETFs, the decision making isn't difficult for me and has the added benefit I am now able to ignore the gyrations of the markets.

Each has to approach it in their own way of either aiming to live off investment income, drawn down of capital on a total return concept or a combination of both.

I feel it is those who chose not to invest in the share market or don't have sufficient funds to do so will find their futures somewhat fraught and stressful.

Just my view for what it is worth.

 

[JohnDe]

Yep.

But eventually I'm going to have to buy a new bogan ute... maintenance on the pile of bricks, replace the bore pump, buy a new pair of RM Williams boots, etc.

I'm up for cataract surgery sometime in the future and probably hearing aids, not to mention mobile phones which I manage to destroy with monotonous regularity.

And let's not mentioned the occasional culinary extravagance

All are affected by inflation over the long-term... 10, 20, 30 years henceforth.

I watched my mother's wealth (because she refused to do anything other than term deposits) from over a million dollars (when that was actually a shytload of cash) to 50k when she died, over 30 year period.

Hopefully, if I get to 90, I will be able to pay a nubile young lady to cut my wagyu beef up into small enough pieces to chew

There are no more Ute's for me, so I'll be keeping the one I picked up in 2014 until the day that I can't drive

 

[Belli]

There are no more Ute's for me, so I'll be keeping the one I picked up in 2014 until the day that I can't drive

View attachment 141240

Meh. My previous car had a love affair with a kangaroo one morning out Tarago way and left me so I had to settle for a used Toyota 2011 sedan.

 

[Dona Ferentes]

Bigger than expected by whom? ... Interest rate movements in 0.25% increments have been a standard practice for quite a while now, to the point that any movement by a different amount would be notable.

The RBA action yesterday was interesting for a couple of reasons

• It happened during an election campaign = tricky / delicate.
• It carried the rate up to 0.35% by lifting 25 bips from 0.10%
• lifting to 0.25% would have been inconsequential, while lifting to 0.50% would have been too political.

Now as @Smurf1976 states, a standard interest rate movement is 25 bips, and so we have an aberration. My prediction, for what it's worth, is that the next, post-election, lift will be 40 bips, to take it to 0.75%. Then the RBA could raise further in the normal increments. And possibly to be in the 2's sometime next year.

And for what it's also worth, pundits who get paid to prognosticate are positing further out.

Economists at the four major banks agree the cash rate will exceed 1 per cent by Melbourne Cup day, after the Reserve Bank took a decisively hawkish turn at Tuesday’s policy meeting, and stepped up the fight against inflation.

- CBA and NAB are going for 1.35% by end of November
- Westpac is forecasting a move of 40 basis points in June on the way to a benchmark rate of 1.75 per cent by the end of the year.
- ANZ sits in between, anticipating the cash rate at 1.50 per cent by the end of the year.

 

[againsthegrain]

has any bank passed anything yet into deposit rates?

 

[peter2]

pundits who get paid to prognosticate

Are overpaid.

 

[qldfrog]

It isn't that actually. A number of the components (education, white goods, alcohol & tobacco, house purchase, etc) in the CPI do not apply to me. For the others such as fuel costs or groceries, any actual monetary increase is minor - about $400 pa combined I estimate - and is easily accommodated within my finances and so I have no need to care about it.

Really, no insurance, no water, no electricity, no car, no taxi no transport you get internet?
the CPI is a BS under estimate of real cost inflation.And whatever wealth you have had is getting eaten
inflation as I need to pay more for xxx is nothing for investors vs the real depreciation of FIAT
Inflation is the most generic tax you can inflict on a population..at least it is not just the middle class paying it;-)

 

[qldfrog]

has any bank passed anything yet into deposit rates?

ROL...

 

[divs4ever]

has any bank passed anything yet into deposit rates?

i was busy elsewhere today , but i would be ASTOUNDED if one( or some ) did

i notice my main bank ( a small one ) is DECIDING on the response to the RBA hike , i assume on loans , first

CBA seems to have adjusted variable rate loans promptly

i haven't looked elsewhere but assume most will raise by the end of the week ( on variable rate loans )

the tardiness on raising rates made for deposits , mirrors occurrences i experienced in earlier years ( 1970's and 1980's )

 

[PZ99]

The RBA action yesterday was interesting for a couple of reasons

• It happened during an election campaign = tricky / delicate.
• It carried the rate up to 0.35% by lifting 25 bips from 0.10%
• lifting to 0.25% would have been inconsequential, while lifting to 0.50% would have been too political.

Now as @Smurf1976 states, a standard interest rate movement is 25 bips, and so we have an aberration. My prediction, for what it's worth, is that the next, post-election, lift will be 40 bips, to take it to 0.75%. Then the RBA could raise further in the normal increments. And possibly to be in the 2's sometime next year.

And for what it's also worth, pundits who get paid to prognosticate are positing further out.

- CBA and NAB are going for 1.35% by end of November
- Westpac is forecasting a move of 40 basis points in June on the way to a benchmark rate of 1.75 per cent by the end of the year.
- ANZ sits in between, anticipating the cash rate at 1.50 per cent by the end of the year.

I can't see rates going that far without crashing the economy. They could even go down again by that point